Gibson Guitars CEO Calls Out The Government For 'Regulating Business Through Criminal Law' [Updated]

from the violating-obscure-statutes?-that's-a-paddlin' dept

Update: Of course, just about the time we posted this, the news came out that Gibson has decided to settle, though it still mainstains it did nothing wrong. It got off by having to pay $350,000 and by forfeiting the confiscated wood, which it notes is much less onerous than fighting this through. So this story is now done, but the original post below still highlights the ridiculous situations that Gibson was put in, and which many others could easily end up in.

It's been close to a year since the Justice Department raided Gibson Guitars for using "illegal wood" on the fingerboards. You'd think something like "illegal wood" wouldn't require the use of the term "raid," or the services of 30 agents with guns and bulletproof vests, but hey, welcome to America. The raid was authorized under the Lacey Act, an act whose original use was to curb poaching of illegal species, but soon spread (as these things do) to cover the importing other wildlife and plants.

The fun thing about the law is that staying in compliance requires knowing not only the particular details of over 200 other countries' laws, but also a bit of mind-reading in order to suss out how the federal government will interpret each one of these laws. Put it all together and you've got Gibson's situation, which is detailed in a post for the Wall Street Journal (gated) but also helpfully detailed at Cato's new National Police Misconduct Reporting Project. The first indication that this raid was a complete abortion of justice is the fact that the wood Gibson used had made it into the country without being seized:
The fingerboards of our guitars are made with wood that is imported from India. The wood seized during the Aug. 24 raid, however, was from a Forest Stewardship Council-certified supplier, meaning the wood complies with FSC's rules requiring that it be harvested legally and in compliance with traditional and civil rights, among other protections. Indian authorities have provided sworn statements approving the shipment, and U.S. Custom allowed the shipment to pass through America's border and to our factories.
Having made it through the safeguards that were set up to stop illegal imports, one would think that the material was cleared for use. But this sort of clear thinking fails to take into account that every law is somehow still open to multiple interpretations:
Nonetheless, the U.S. Fish and Wildlife Service decided to enforce its own interpretation of Indian law, arguing that because the fingerboards weren't finished in India, they were illegal exports. In effect, the agency is arguing that to be in compliance with the law, Gibson must outsource the jobs of finishing craftsmen in Tennessee.
Seizure laws are incredibly popular with everyone from large government agencies to small town police departments and having 4,000 federal criminal offenses on the books makes it very simple for law enforcers to find inadvertent or unwitting criminals and inflict damage on them through seizures and imprisonment. Any avenue that looks as if it may provide agencies like this with more power and control is generally explored to its fullest.
This is an overreach of government authority and indicative of the kinds of burdens the federal government routinely imposes on growing businesses. It also highlights a dangerous trend: an attempt to punish even paperwork errors with criminal charges and to regulate business activities through criminal law. Policy wonks call this “overcriminalization.” I call it a job killer.
Many business owners have inadvertently broken obscure and highly technical foreign laws, landing them in prison for things like importing lobster tails in plastic rather than cardboard packaging (the violation of that Honduran law earned one man an eight-year prison sentence). Cases like this make it clear that the justice system has strayed from its constitutional purpose like stopping the real bad guys from bringing harm.
That is exactly where the system is now. Criminal intent is no longer factored in to the equation. The old chestnut, "Ignorance of the law is no excuse," is actually a completely valid excuse. 4,000 federal criminal offenses on the books means that heavier sentences and fines are levied against criminals who in the past would have been subject to less harsh civil and/or local judgments. Add to that 40,000 new state laws introduced in 2012 alone, and you've got the perfect recipe for government overreach and thousands of chances to be hauled into court to attempt to prove a negative.

Cato's Tim Lynch pointed out the absurdity of the current situation during an address to the House Subcommittee on Crime, Terrorism and Homeland Security:
The sheer volume of modern law makes it impossible for an ordinary American household to stay informed. And yet, prosecutors vigorously defend the old legal maxim that "ignorance of the law is no excuse." That maxim may have been appropriate for a society that simply criminalized inherently evil conduct, such as murder, rape, and theft, but it is wholly inappropriate in a labyrinthine regulatory regime that criminalizes activities that are morally neutral. As Professor Henry M. Hart opined, "In no respect is contemporary law subject to greater reproach than for its obtuseness to this fact."

It is absurd and unjust for the government to impose a legal duty on every citizen to "know" all of the mind-boggling rules and regulations that have been promulgated over the years. Policymakers can and should discard the "ignorance-is-no-excuse" maxim by enacting a law that would require prosecutors to prove that regulatory violations are "willful" or, in the alternative, that would permit a good-faith belief in the legality of one's conduct to be pleaded and proved as a defense. The former rule is already in place for our complicated tax laws — but it should also shield unwary Americans from all of the laws and regulations as well.
Gibson Guitars had every reason to presume the wood it was using was perfectly legal. The company had taken great care to stay within the confines of the laws as it understood them. Instead of being given the benefit of a doubt when the issue of legality arose (and after the wood had already cleared Customs), the company was raided as though it were cranking out black market explosives rather than ordinary, harmless guitars. Gibson always has the option to sue but the odds of getting this case to be heard, much less winning it, are low. Even with higher odds, the time and expense would far outweigh the losses sustained by Gibson at the hand of the federal government.

This leaves companies like Gibson in the unenviable position of putting even more time and money into compliance, rather than innovation, expansion or outside investments. In today's economy, the private sector really can't afford another "job killer," especially one they have to pay for out of their own pockets.

Filed Under: arbitrary, doj, forfeiture, guitars, seizure, wood
Companies: gibson

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  1. identicon
    Anonymous Coward, 7 Aug 2012 @ 8:58am

    This is my impression from following the case. I'm a big Les Paul fan, and I also like this sort of legal thing, so I've been watching this case for a while now.

    There was a raid in 2009 that got several pallets of ebony that the government claimed was sourced from India but exported illegally because of labeling that was misleading to Indian authorities, resulting in violation of Indian export laws. No US laws were violated except perhaps the Lacey Act, and Indian authorities certified the export. No charges or civil cases were filed as a result of this raid

    In 2011, the government filed a civil case regarding ebony that Gibson purchased from a German company that obtained the wood from Madagascar, making it illegally exported. Gibson at that time claimed that it was under the impression that the wood was legal, but later admitted that they had failed to act when they received information regarding the potential illegality of the wood. There was never a proven link between the ebony seized in the raid (which was seized under the premise that it was deceitfully exported from India) and the German supplier. The link to the German supplier was brought up by going through Gibson's import records.

    2 months later, the feds performed a second raid on the factory - this one with mutiple armed agents and breach tactics - that was after Indian rosewood. All this wood was later returned, no charges were filed, and Gibson was assured they could continue importing Indian rosewood and ebony.

    Gibson settled the Madagascar ebony case without admission of wrongdoing, claiming the $350k fine plus the loss of the wood was much less expensive than the potential cost of fighting the case. It is possible that the ebony seized in 2009 was the Madagascar ebony, but it is equally likely that the seized ebony was the allegedly mislabled wood from India, which was never brought into the case. A request to return the ebony was denied by the courts, and Gibson forfeited its right to the wood as a part of the settlement.

    There was a pretty big outcry about the whole case, as Gibson regularly donates to conservative political candidates, several competitors (notably Martin guitars) donated heavily to the current administration. Indian ebony and rosewood from the same parts of India (which were the motivations behind the raids) are used by both companies. Gibson appears to have been singled out both for legal attention and police action. Even if the alleged political motivations are discarded, the whole affair appears to have been a fishing expedition enacted with very heavy hands. Gibson is noted for being eco-friendly, and the Rainforest Alliance certifies Gibson wood, including all the wood that was seized.

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